MSEB kicks off special purpose vehicle plan for Dabhol stake

Tuesday, August 12 1997

MSEB kicks off special purpose vehicle plan for Dabhol stake

Vandana Saxena

MUMBAI, Aug 11: The Maharashtra State Electricity Board (MSEB) has initiated setting up of the special purpose vehicle (SPV) to pick up a stake in the Dabhol Power Company (DPC). The board will choose one from the three names suggested for the SPV; Maharashtra Power Finance Corporation Limited, MSEB Capital Investment Limited and MSEB Development & Finance Limited.

The initial equity capital of the new company is likely to be around Rs 5 crore which will be funded by MSEB through internal accruals, said sources. The board will submit a formal application to the registrar of companies (RoC) in a month's time, industry sources said.

MSEB had earlier declared its intention to hold a 30 per cent stake in DPC. The board has to invest around Rs 700 crore to subscribe to the stake in the power company. The balance funds will be raised through a Rs 600-crore bond issue.

MSEB has decided to invest in the power project through the SPV mechanism considering the unlimited libality status of DPC. ``MSEB would not like to risk its substantial assets by investing in an unlimited liability company directly,'' said the board officials.

In case DPC faces liquidation or decides to abandon the project, MSEB would like to save its assets form being attached and therefore it was necessary to set up a limited liability company to invest in the venture, they added.

Announcing the launch of the SPV earlier, deputy chief minister of Maharashtra, Gopinath Munde, who also holds the energy portfolio, said the state government will also support setting up of the SPV. The bond issue will be managed by the JM Financial.

The merchant banker was selected through a competitive process to advise MSEB on the issue of equity participation in the DPC. However, it is still not clear when the issue will be launched.

Enron Development Corporation, which presently holds a 80 per cent stake in the company, will offload 30 per cent to the MSEB. The balance 20 per cent stake is held by General Electric and Bechtel equally. The power company is implementing a 2,450 MW power project in the state. The 826 mw phase one of the project is expected to be commissioned during 1998.